What Will Central Banking Look Like in 2014?

Inflation is slowing in the developed world but not clearly tamed in developing economies. Growth is highly uneven across the globe and the next big shift in capital flows unknown. Against that backdrop, central banks are charting different courses.

In the U.S., amid an improving economic outlook, the Federal Reserve is trying to time an exit from much-discussed bond-buying programs that in 2013 pumped more than $1 trillion into the financial system. In Frankfurt, however, the European Central Bank is struggling to come up with solutions for economic torpor that looks increasingly like Japan.

And in China, People’s Bank of China governor Zhou Xiaochuan embarks on a third term with one of the most difficult challenges of all: Opening the world’s second largest economy to the tempestuous global flows of capital while managing an escalating domestic debt boom.

Need a map? Here’s a guide to the outlook for central banks, large and small around the world. Follow the links for more:

The Federal Reserve — The Fed enters a year of leadership transition and debates over how to wind down some of its easy money policies as the economy strengthens in 2014. If all goes according to policy makers’ plans, Janet Yellen will soon succeed Ben Bernanke as Fed leader and quickly face multiple challenges, including guiding Fed policy, forging consensus within a fractious policy committee and honing her public communication skills.

European Central Bank — The ECB has shown it can conduct crisis management with the best of them, using a verbal commitment to buy government bonds of stressed countries to stabilize southern European debt markets and preserve the euro.

Bank of England — The BOE enters 2014 looking out over an economy finally picking up speed after several years in the slow lane. With unemployment falling faster than the central bank predicted, the item at the top of officials’ agenda will be whether to tweak BOE Gov. Mark Carney’s flagship “forward guidance” policy.

Bank of Japan — For BOJ Gov. Haruhiko Kuroda, 2013 was a good year. Prime Minister Shinzo Abe picked him in the spring to lead the central bank in its mission to turn around falling prices. Eight months later, there’s mild inflation and business sentiment is at a six-year high, thanks to the aggressive easy money policy he orchestrated.

People’s Bank of China — China’s central bank needs to get a mix of offense and defense right in 2014. People’s Bank of China Governor Zhou’s mission: to put in place a reform agenda that stalled under China’s former leaders.

Bank of Canada — The key question for the Bank of Canada in 2014 is whether it will cut interest rates to counter low inflation.

Reserve Bank of Australia — Australia’s central bank governor Glenn Stevens heads into 2014 with few tools left to spur the resource-rich economy as a long mining boom fades, other than jaw-boning the local currency.

Reserve Bank of New Zealand — New Zealand’s central bank has held interest rates steady for nearly three years. Now, rising costs of housing and a swiftly improving economy could prompt it to raise rates as soon as January.

Reserve Bank of India — Raghuram Rajan’s big challenge in 2014 will be building on the gains he’s scored since taking the helm of India’s central bank last fall.

Bank of Korea — South Korea’s central bank expects its export-dependent economy to do better in 2014 as global growth strengthens. But there’s one major concern: a weaker yen.

Bank of Indonesia — Indonesia’s central bank is facing a dilemma: whether to raise rates further — slowing the economy — or allow its currency to fall further.

Swiss National Bank — The Swiss National Bank will likely hold interest rates near zero for a third consecutive year as the central bank tries to mute demand for the country’s currency without stoking a real estate bubble.

Sweden’s Riksbank — The coming year will be another one in which the world’s oldest central bank, must balance its concerns about high levels of household borrowing and low inflation.

Norges Bank — Norway’s central bank has spent the last 18 months delaying the timing of future interest rate hikes. There is little to suggest that 2014 is going to be radically different.

National Bank of Denmark — Denmark’s central bank is an anomaly in the central bank world in that its mandate is simply to keep the Danish currency, the krone, trading within a specified band against the euro, even though Denmark has no intention of joining the euro currency union.

Bank of Russia — The Bank of Russia has shown surprising resistance to calls for easier monetary policies to bolster waning economic growth, and is expected to keep doing so as it focuses on fighting inflation and combating money laundering and tax evasion.

Hungarian National Bank — Hungary will sustain its easy money policies in 2014 as long as financial markets permit, aiming to juice a feeble recovery and help the government’s economic policy.

National Bank of Poland — Poland’s monetary policy council will watch for the right moment in 2014 to begin tightening credit to prevent faster growth from stoking higher inflation.

Central Bank of Brazil — Brazil’s central bank may be nearing the end of a series of interest rate increases aimed at combating high inflation.

Bank of Israel — After the Bank of Israel’s 2013 was dominated by the departure of Gov. Stanley Fischer and the drawn-out search for a replacement, 2014 will be the year in which his successor Karnit Flug will have to make her own mark.

South African Reserve Bank — South Africa’s central bank spent the last 18 months stuck between a rock and a hard place, and it doesn’t look likely to budge any time soon.

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